Vodacom shares fall after earnings disappoint

Vodacom Group shares fell the most in more than a month after Africa’s biggest wireless operator by market value reduced its first-half dividend amid weaker economic conditions in some of its key markets.

The stock slumped as much as 4.6%, the most since 4 October, and traded 3.2% lower at R147.50 as of 10.29am in Johannesburg. That compared to a 0.6% gain on the FTSE/JSE Africa Top 40 Index.

Shareholders will receive an interim dividend of R3.90/share, compared to R3.95/share a year ago, the Johannesburg-based company said in a statement on Monday. Earnings per share excluding one-time items rose 1.1% to R4.45. The dividend reduction was partly due to the impact of issuing shares for the purchase of a 35% stake in Safaricom, Kenya’s biggest company.

The operational performance was weaker than expected and that impacted the dividend

“The operational performance was weaker than expected and that impacted the dividend,” Peter Takaendesa, an analyst at Mergence Investment managers in Cape Town. He was looking for earnings to rise 6-7% in the first half.

Vodacom, which is 65% owned by Newbury, England-based Vodafone Group, is investing in data services in South Africa and international operations as more customers start using Internet and smartphones while voice usage declines. The company is the market leader in its home market, ahead of MTN Group, and now has 40m customers in a country with population of about 56m.

Revenue from data services surpassed voice for the first time in South Africa, Vodacom’s biggest market, as more customers switched to Internet-enabled phones. Helped by promotions, the wireless operator added more customers at home and in markets such as Tanzania, it said.

Data

“We expect that data contribution in our international markets could surpass that of voice in the next five years or so,” CEO Shameel Joosub said on a call with reporters.

Vodacom reiterated growth targets for the next three years. Service-revenue growth is expected to be in the mid-single-digit percentage, while earnings before interest and taxes will probably rise in the mid-to-high single-digit percentage.

The company’s shares plunged on 5 October after South Africa’s antitrust regulator started a probe into a contract with national treasury. “We are fully cooperating,” Joosub said. “We believe that the awarding was a well-governed process.” — Reported by Janice Kew and Loni Prinsloo, (c) 2017 Bloomberg LP